Outlook Conference: Rules, tax reform ‘key to easing affordability crisis’

Higher density housing and the removal of distortions such as stamp duty and negative gearing are key to improving housing affordability, according to KPMG.

KPMG Australia partner and chief economist Brendan Rynne says a combination of regulatory and tax reform was needed to address the affordability crisis.

Reforms to allow for higher-­density housing and the removal of distortions in the market, including stamp duty and negative gearing, are essential to improving housing affordability in Australia, according to KPMG.

Speaking at the The Australian-Melbourne Institute Economic and Social Outlook Con­ference, KPMG Australia partner and chief economist Brendan Rynne said a combination of regulatory and tax reform was needed to address the affordability crisis, but added the reforms should be done in unison to avoid “an investment freeze” that would make things worse.

“Homeowners cannot expect to see their home values continually rise, yet also expect the government to fix the housing afford­ability problem, so that their kids can buy their own home. We know that’s the political challenge,” Dr Rynne told the conference.

“In terms of fixing housing affordability, there are two policies that matter more than any other: they relate to regulatory policy and tax policy.”

Regulatory policy should be aimed at increasing housing density, he argued.

“With a fixed supply of land within our cities, planning reforms need to occur to ensure we optimise the efficiency of this resource. The question of adequate shelter has to address the issue of quality. How many bedrooms and bath­rooms … is adequate?”

Tax policy, meanwhile, should be adjusted to remove, or at least minimise, the distortions in the housing market, Dr Rynne added.

“Tax policies like stamp duty, capital gains tax, negative gearing, principal place of residence exemptions for land tax and other concessions, all collectively influence when and how new and existing housing stock flows into and out of the market.

“Importantly, if we’re going to be serious about fixing housing ­affordability, any reform to regulatory and tax policy needs to be considered in unison. Where reforms get out of sync, there is a risk that you could induce an investment freeze, thereby worsening the situation,” he warned.

Reform was needed to make it easier to build higher-density living, which would see the cost of land per dwelling fall, he added.

“We simply need to use less units of land per dwelling than we currently do.”

National Housing Finance and ­Investment Corporation chief Nathan Dal Bon said the private sector would deliver the vast bulk of both rental and owner-occupied housing in the future, but that there was a role for government to play too. “There is a segment of the market, particularly for those on low incomes, or no income, where the market may not necessarily provide the necessary accommodation services,” Mr Dal Bon said.

“It is a national problem and so I would argue that there is also a need for a national solution.”

The arguments for addressing the housing affordability crisis come days after the Albanese government laid out its housing reform agenda in the federal budget.

The ambitious agenda includes pledging to get one million new homes built by the end of the decade, starting from 2024, as part of a national housing accord to be struck between governments, investors and industry.

The government also said it would set aside $350m to fund an additional 10,000 affordable homes by the end of the decade, on top of existing commitments.